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You may not realize it at the time, but your business credit is just as important to the overall health of your business as your personal credit is to your private life. Many creative people will rush headlong into starting their own business without any inkling on how to create a healthy business credit profile. Let's take a look at a few basic steps you need to take to give your new business the healthy start it needs to get off the ground.
Separation is Key
There is a reason why so many companies out there are listed as corporations. When a company becomes a corporation, it essentially becomes its own person with its own credit profile and history. Even if your own personal credit is sterling, you want to create a LLC or limited liability company so that in case your business fails, your own personal credit will remain untouched. You should never, ever run a business based on your own personal credit profile. The failure rate, even for well run businesses, is simply too high and the cost is far too great.
Stick to the Plan
Next, you need a first class business plan. If you aren't familiar with business plans, they are like an outline for your business. Before you can lay a single brick or write your first line of code for your business website, you need to have a viable, successful business on paper. You will need to outline every expense, from overhead to employee salaries to incidentals. You will need to go into detail about the product or service you will be providing and how you plan on making a profit. A viable business plan is absolutely essential to getting the loans, and the credit, you need to start your business.
Cross your T's and Dot Your I's
Going hand in hand with your business plan is making sure that you have all of the necessary permits and legal permissions you need to start your business. If you are planning an online business, make sure that you are allowed to run it out of your home. You could have the best written business plan in the world but if you can't get your business licensed, it is a non starter and no bank will even consider extending you the credit you need.
Time to Get Assessing
Before you head off to your lender of choice, you will need to perform a credit assessment. A credit assessment is an evaluation that you can perform that will give you an idea of the standards you need to meet to get the necessary financing. These assessments don't take very long and they can give you a goal to shoot for so you don't waste time talking to a lender who is simply going to turn you down.
Once you've gotten an initial investment from a lender, it is up to you to maintain a good credit score. Vendors will be much more willing to do business with you if you have a small debt load, and it will be easier to convince other investors to come on board if you are paying your bills on time. Getting and maintaining a good business credit score is all about preparation and execution of your business plan.
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